Economic Crisis Will Require Patience

We live in an ADHD society, where we expect we can pop a pill anytime there's a problem.

Perhaps that's why politicians are never short of answers for how to cure our current economic funk, although at least during congressional or senate hearings, they sometimes seem woefully short of any financial acumen). The trouble is both political parties' ideas about how to cure our current plight are wrong.

Flip on one of the cable news channels at all hours of the day and you'll find politicians and talking heads pontificating about simple answers to complex problems.

On the right, we have tax cuts presented as the ideal fix for high joblessness. If only we extended the Bush tax cuts, cut payroll taxes, and cut corporate taxes, we are told, small businesses would have no uncertainty. They would start hiring people. Small business is the engine of job growth for America. But will a tax cut -- in this malaise -- really give business leaders the confidence to start hiring? I doubt it.

How do you give business leaders confidence to hire? They'll only hire when they'll make more money than if they don't. They need to see consumers starting to buy again in greater numbers. But we know consumers are hunkering down and saving more, partly because business leaders aren't hiring.

It's chicken-and-egg. How do you goose consumers to spend when businesses won't hire? Through tax cuts? Again, that alone is not going to change someone's outlook with the headwinds of uncertain housing prices, still elevated debt levels and a poor job market.

So, on the left, we hear the chants for more stimulus. Actually, this chant is virtually only being made by Paul Krugman, as most left-leaning politicians are fearful to support the idea because they suspect the electorate will react negatively to the idea.

Krugman had an interesting op-ed over the weekend in which he compared 2010 to 1938 and effectively showed how politicians then were guided by the polls and how wrong the public had been (now with hindsight). In 1938, like now, the majority of the public wanted tax cuts instead of increased government spending, yet that wasn't what got us out of the protracted economic depression.

It took a World War -- and the massive stimulus it brought with it -- to bring the world out of its funk back then. Krugman uses that historical fact as support for his call for a gigantic stimulus now.